- Paying Insurance Premiums for Patients
- November 20, 2013
- Law Firm: Holland Hart LLP - Denver Office
In some cases, hospitals and other providers may want to pay premiums for patients to maintain insurance coverage for health care services if the patient cannot otherwise maintain such coverage. There are different motivations for this practice. In some cases, paying insurance premiums for patients who are in an ongoing course of treatment may ensure that necessary treatments are not interrupted. In other cases, it may be more cost-effective for a hospital to pay the premiums to maintain insurance instead of providing uncompensated care to an otherwise uninsured patient. Some have questioned whether these actions violate law, including the federal fraud and abuse laws. Recent information from the Department of Health and Human Services ("HHS") has offered seemingly conflicting guidance on providers paying for premiums for insurance through insurance marketplaces (also called "Exchanges"). In light of HHS's recent comments, below is a summary of legal considerations providers should contemplate before paying health insurance premiums for patients.
Federal health care program beneficiaries
While Advisory Opinions issued by the Office of the Inspector General ("OIG") have given favorable outcomes for premium payments by charitable organizations, including arrangements where donations to such charitable organizations have been made by providers (Adv. Ops. 07-18, 07-06, 06-13, 06-09, 06-04, 02-1, 01-15 and 97-1), the OIG has distinguished those arrangements from premium payments made directly by providers which could potentially influence a beneficiary to continue care with that provider (Adv. Ops. 97-1 and 01-15). The OIG's Special Advisory Bulletin on gifts and other inducements to beneficiaries specifically notes that "paying the premiums for a beneficiary's Medicare Part B or supplemental insurance is not protected" by an exception to the CMP Law permitting certain waivers of copays or deductibles based on individual need determinations (67 Fed. Reg. 55855 (August 30, 2002)).
In its most recent Advisory Opinion 13-16, posted on November 14, 2013, the OIG considered a proposed arrangement where an insurer would pay Medicare Part B premium costs for beneficiaries with End-Stage Renal Disease ("ESRD") who are enrolled in a group health plan offered by the insurer and receiving dialysis services. The OIG concluded that the proposed arrangement would not constitute grounds for the imposition of civil monetary penalties and, "although the proposed arrangement could potentially generate prohibited remuneration under the anti-kickback statute if the requisite intent to induce or reward referrals of Federal health care program business were present, the OIG would not impose administrative sanctions." In its discussion of the AKS, the OIG noted that the proposed arrangement implicated the AKS, and therefore the totality of facts and circumstances needed to be analyzed to determine whether the proposed arrangement "presents more than a minimal risk of fraud and abuse." Significantly, in the proposed arrangement, the OIG noted that the "offer of the premium subsidy is not contingent on the Group Enrollee obtaining dialysis services (or any other services) from a particular provider." The Opinion specifically contrasted this factor with circumstances where independent dialysis facilities paid for Medicare premiums for needy beneficiaries with ESRD. The OIG previously withdrew a potential safe harbor to the CMP Law that would allow for such payments and in this recent Opinion stated that "we believed such a safe harbor would promote the very conduct the statute prohibits: offering remuneration to influence the selection of a particular provider." Given the OIG's comments, a provider's direct payment of a federal program beneficiary's premiums appears to carry significant risk.
In contrast to paying premiums for federal program beneficiaries, HHS recently affirmed that premium payments for coverage through insurance marketplaces does not implicate the AKS or, presumably, the CMP Law. In a letter dated October 30, 2013, HHS Secretary Kathleen Sebelius stated that HHS does not consider qualified health plans ("QHPs") and programs under Title I of the Affordable Care Act ("ACA"), including the insurance marketplaces, to be "federal health care programs" within the meaning of the AKS. Because the AKS only applies to payments to induce items or services under federal health care programs, it would appear that providers may pay patients' Exchange premiums without violating the AKS or CMP Law.
However, on September 4, 2013, just days after Secretary Sebelius's letter, the Centers for Medicare and Medicaid ("CMS") issued a Q&A discouraging providers from paying such insurance premiums. That Q&A stated, "HHS has significant concerns with this practice because it could skew the insurance risk pool and create an unlevel field in the Marketplaces. HHS discourages this practice and encourages issuers to reject such third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary." Because CMS failed to cite to any specific laws this practice would violate, it remains unclear under what authority HHS would take action against such premium payments. It may be that HHS is considering other laws or regulations that might prohibit such payments. Additionally, following issuance of the Secretary's letter, Senator Charles Grassley formally questioned the determination that QHPs and other ACA programs do not fall within the definition of "federal health care programs" and has requested further information from Secretary Sebelius on the basis for that decision. As a result, this issue may continue to evolve and providers should be cautious when paying insurance marketplace premiums despite Secretary Sebelius's letter.
Private insurance and COBRA continuation coverage
Presumably, the AKS and CMP Law would not apply to payment of premiums for private insurance because such insurance would not implicate federal healthcare programs. Health care continuation coverage under employer-sponsored group health insurance is available to qualified beneficiaries under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") for 18 to 36 months after a qualifying event, so long as payments for COBRA coverage are made. The final COBRA regulations issued in 1999 discussed third-party payment of the cost of continuation coverage and stated that the intent of the language of the final rule was to "make clear that any person may make the required payment on behalf of a qualified beneficiary" (64 Fed. Reg. 5160, 5170 (February 3, 1999)). Hospitals are specifically referenced as a party that might make such payments on behalf of a beneficiary. If a provider is considering paying premiums for a private pay patient, including COBRA beneficiaries, it should develop a policy detailing the process for such payments. Among other things, the provider should determine whether the patient is a federal healthcare program beneficiary because, if so, the concerns set forth above will apply. In addition, providers should consider the following issues:
• Tax-exempt entities
Payment of insurance premiums on behalf of patients may affect a hospital's or other provider's status as a tax-exempt entity. Tax-exempt entities must avoid "private benefit" transactions that serve private, rather than public, interests. Paying premiums might be construed as conferring private benefits, especially where there is inadequate documentation of financial need. On the other hand, a provider's donation to an unrelated charitable organization that made premium payments for individuals based on independent determinations of need would likely further the entity's charitable purposes. When considering the structure of a proposed plan to pay premiums for patients, a tax-exempt entity should carefully consider the elements of its policy in the context of Internal Revenue Service ("IRS") rulings on private benefit to avoid actions that could jeopardize tax-exempt status.
• State laws prohibiting kickbacks or patient inducements
State laws may prevent payment of kickbacks and inducements to patients similar to the federal AKS and CMP Law. Unlike the federal laws, however, state laws may apply to both government-funded and private health care coverage. Providers should familiarize themselves with state fraud and abuse laws to determine if premium payments would be prohibited by such laws.
• Private insurance contracts
If a provider is considering paying premiums under a private insurance contract, the terms of the applicable insurance contract should also be considered. It is possible that payment by a third-party could be contractually prohibited, especially in light of HHS's statement encouraging insurers to reject third-party payments made for coverage through insurance marketplaces.
The ability of a provider to pay for insurance premiums for individuals otherwise unable to maintain coverage is dependant on the source of health care coverage, the type of entity seeking to provide such payments, and the applicable state laws and insurance contract terms. There is significant risk for a provider in paying for insurance premiums for a federal health care program beneficiary. As for payments for premiums in the insurance marketplaces, based on HHS's current position, it does not appear that payment of premiums by providers would result in AKS or CMP Law violations, but HHS has decried this practice. As a result, providers should be cautious and monitor HHS's evolving position. If a provider is considering paying COBRA premiums, it is advisable to develop a policy detailing the process for such payments. The policy should include making a determination of if a patient is also a federal health care program beneficiary (if so, based on the considerations of the AKS and CMP Law, discussed above, premium payments should not be made). Tax-exempt entities should also be mindful of potential private benefit issues. Finally, although it may not address all situations where a provider may wish to pay for a patient's premiums, providers should be aware that donations to unrelated charitable organizations which make premium payments for needy individuals have been looked at favorably in Advisory Opinions and could be one mechanism for providers to assist with premium costs.If a patient is a beneficiary of a federal health care program, including Medicare and Medicaid, there is substantial risk in paying for insurance premiums. Under the Anti-Kickback Statute ("AKS"), it is a criminal offense to knowingly and willfully offer remuneration to induce or reward referrals of items or services reimbursable by a federal health care program (42 U.S.C. Section 1320a-7b(b)). Similarly, the Civil Monetary Penalties ("CMP") Law prohibits offering a Medicare or Medicaid beneficiary any remuneration which is likely to influence the beneficiary to obtain items payable by Medicare or Medicaid from a particular provider (42 U.S.C. Section 1320a-7a). The penalties for violating these laws can be severe, from significant civil penalties to exclusion from federal health care programs and criminal prosecution.